Antitrust

S H E A R M A N & S T E R L I N G L L P | 7 9 POTENTIAL INTEROPERABILITY PROBLEMS IN THE FINTECH SECTOR Competition concerns have also been raised in relation to Apple's mobile payment system, Apple Pay, as Apple does not grant access to its near field communication (NFC) technology to other online payment services providers: • At European Union (EU) level, Commissioner Vestager recently confirmed that the EC is paying attention to developments in this area, but referred to the fact that there currently operate in the market "several mobile payment solutions based on existing card payment systems, where the mobile device acts as technical interface between the consumer and the merchants, while the transactions remain based on tokenised card credentials." 5 She noted as examples systems such as Google Pay and Samsung Pay. Therefore, while it seems the EC considers that consumers currently have access to alternative payments methods, it will be carefully monitoring developments in this market. • Outside the EU, various banks asked the Australian Competition and Consumer Commission (ACCC) whether they could jointly bargain with and boycott Apple to get access to its NFC. 6 While the ACCC accepted that this would increase competition in mobile payment systems, it found that the public benefit of this would be outweighed by likely distortions of competition elsewhere, in particular: (i) it would affect Apple's business model by which it provides an integrated hardware-software offering to compete with Google's Android devices; (ii) it is uncertain how competition may develop in these nascent and rapidly evolving markets (e.g., contactless card payments and mobile payments on smartwatches) and the ACCC did not want to artificially influence or hamper innovations in this area; and (iii) Apple Pay and other digital wallets could help increase competition among banks by facilitating switching between card providers. The EC and NCAs will be closely monitoring developments in the mobile payment services market, and not just in respect of Apple. MERGER CONTROL CHALLENGES IN THE FINTECH SECTOR For competition authorities, substantive merger analysis in the fintech sector can be complex since a traditional analysis of market shares and market definition can fail to capture the reality of fintech market dynamics. For instance, fintech mergers are data intensive, and the combination of datasets through mergers could give incumbents a competitive advantage which is not reflected in market shares. In addition, as fintech target companies are often start-ups with either zero or very low turnover, they can escape merger control in turnover-based jurisdictions as the EU. In October 2016, the EC debated whether a reform of the merger jurisdictional thresholds is necessary, but it is unclear whether legislative reform can be expected any time soon or at all. Companies should be aware that some countries, including Austria and Germany, have introduced jurisdictional thresholds based on transaction value and that the EC may be monitoring the functioning of the new test when considering its own merger thresholds. CONCLUSION Looking forward, there could be further significant changes in the financial services space if large high-tech companies, such as Facebook and Google, enter the market. Given the large amount of consumer data held by such companies, they could gain an unprecedented competitive advantage; e.g., being able to factor in an individual's frequent internet searches to offer more tailored services. Competition authorities will no doubt pay attention to how this could potentially impact the competitive sphere. The EC's focus on fintech is reinforced with the recent announcement of a new financial stability and financial technology unit within the EC's Directorate-General for Financial Stability, Financial Services and Capital Markets Union. Therefore, it is essential that companies operating in this sphere are aware of the competition issues that new market structures such as blockchain can present and how best to deal with these. 1. For instance, the Swedish competition authority will publish in April a report on "Blockchain Technology a Competition Law perspective" as it considers that blockchain structures will raise competition challenges and the Spanish competition authority in its September 13, 2018 "Report on the impact of new technologies in the financial services market" highlights the risk of potential facilitation of collusion that blockchain technology could entail.  2. OECD, "Blockchain Technology and Competition Policy" (June 8, 2018), para. 18. 3. Case C-40/73, Coöperatieve Vereniging "Suiker Unie" UA v. Commission, (EU:C:1975:174), [174]. 4. See EC-Fact Sheet "Antitrust: Commission confirms unannounced inspections concerning access to bank account information by competing services" October 6, 2017, MEMO/17/3761. 5. Parliamentary Questions, Answer given by Commissioner Vestager on behalf of the European Commission, Question Reference: P-004223/2018, October 1, 2018. 6. Decision of the ACCC of March 31, 2017, Bendigo and Adelaide Bank & Ors — Authorisation — A91546 & A91547.

• Cover